In response to the Queen’s Speech today which addressed plans to split banks into their retail and investment banking functions as part of the Banking Reform Bill, Kevin Burrowes, UK financial services leader at PwC, said:

"Formally signalling intent to pursue ring-fencing helps eliminate uncertainty but, in reality, the banks are already well aware this would be pursued by the government. All banks are already undertaking enormous changes to their business models in light of trading outlook and pressure to generate acceptable returns for investors for the increasing capital that has to be invested.

“The emerging risk is that as the banks become regulated utilities, some banking activities may be pushed into the largely unregulated shadow banking sector. Fixing one problem while another begins to emerge must be avoided."

"Banks will welcome further clarity on the proposals to ring-fence retail banking. The current proposals provide flexibility in how banks design their ring-fenced retail arms, meaning they will look different for different institutions, but should also minimise arbitrary winners and losers and help avoid unintended consequences.

“While the reform will not promote competition, and will require substantial costs to implement the changes, it should provide for greater transparency into the UK consumer banking aspects of these institutions. Several challenges remain, including the potential need to support the industry as it moves away from the free current account model which customers have become used to, but where there is an anomaly relative to most other developed countries."